The times-interest-earned ratio helps to gauge how much cash will be available to the business to pay dividends, to pay the principal on the loan and to reinvest in the business after paying the finance costs.

Question

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The times-interest-earned ratio measures a company's ability to meet its interest payments on its debt obligations. A higher ratio indicates that the company has more cash available to meet its financial obligations.

The Times-Interest-Earned Ratio Helps to Gauge How Much Cash Will